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Breaking news, original reporting, and investigative journalism *on money in politics from the Center for Responsive PoliticsWed, 19 Dec 2018 02:30:02 +0000en-UShourly1https://wordpress.org/?v=4.9.8Exclusive: Nonprofit Funneled Money to Kochs’ Voter Database Effort, Other Conservative Groupshttps://www.opensecrets.org/news/2012/12/nonprofit-funneled-money-to-kochs-voter-database-effort-other-conservative-groups/
https://www.opensecrets.org/news/2012/12/nonprofit-funneled-money-to-kochs-voter-database-effort-other-conservative-groups/#respondFri, 21 Dec 2012 11:15:52 +0000A previously unreported nonprofit network funneled millions of dollars to the Koch brothers' effort to catch up with Democrats' voter microtargeting. And beyond that, it sent money to a collection of other tax-exempt groups that worked to get Republicans elected in the last two campaign cycles.

This article is the latest in an exclusive series about the funding behind politically active tax-exempt organizations that don’t disclose their donors. You can read the other stories in the series here.

Themis was a daughter of Heaven and Earth, the goddess of divine law and order in Greek mythology.

She might be startled that her name was being applied, far more prosaically, to a voter database project spearheaded by David and Charles Koch, the conservative billionaires of Koch Industries, early in the 2010 midterm election cycle. The idea was to reach GOP and libertarian voters more systematically and efficiently, to catch up with the voter microtargeting strategies Democrats had been developing over several years.

And even more matter-of-fact are the names of some of the entities that have funded the conservative endeavor — a collection of organizations that would be at home in a bowl of alphabet soup. Their existence has not been reported previously.

The heart of this network is TC4, a 501(c)(4) tax-exempt organization founded in 2009. According to its first tax filing, covering the period Aug. 28, 2009, through June 30, 2010, TC4 — which had one trustee and a single key employee — made a grant of $2.5 million to Themis Trust.

That wasn’t all. TC4 sent Themis more contributions, though they were disguised. In its most recent IRS Form 990 tax return, which covers the 12 months ending midway through 2011, TC4 lists a grant of $2.5 million to something called STN LLC and one of $1.8 million to DAS MGR LLC. Both are affiliates — or in the formal jargon of tax law, “disregarded entities” — of Themis.

Other groups that received millions of dollars are parts of better-known groups but legally distinguished from them. And still, other organizations have proven ciphers thus far. In total, according to IRS forms filed thus far by the group, TC4 has given away more than $36.5 million.

The existence of TC4 and its role in sending funds to other, politically active nonprofits has been hidden until now in part because 501(c)(4) groups — which all of the recipients of TC4’s grants are — are not required to disclose the names of their donors, a fact that OpenSecrets Blog has covered extensively in its Shadow Money Trail series. Nonprofits must list only those to whom they give grants, making it hard to connect the dots when the starting point is the recipient organization.

Nondisclosing groups — those that don’t identify their donors, almost all of them 501(c)(4)s — played a huge role in the 2012 elections, accounting for more than $311 million in outside spending that was reported to the Federal Election Commission. (More was spent that fell outside reporting requirements.)

The groups aren’t supposed to be primarily involved in politics. But so many of them have been so active on this front since the Supreme Court’s 2010 Citizens United decision that the IRS should be conducting audits, said Marcus Owens, a Washington tax lawyer who formerly headed the Exempt Organizations division of the federal agency.

Many of the groups, in his view, “most certainly would merit investigation,” Owens said — including TC4.

Bare-bones info

Exactly what part TC4 may have played in funding groups between mid-2011 and this year’s election is currently unknown, because the IRS doesn’t require nonprofits to file their 990s until many months after the end of their fiscal years. TC4’s return showing any grants it gave in late 2011 and early 2012 won’t be available until the spring of 2013. And documents showing its activity running up to Nov. 6 will remain out of public view until the following spring, 2014.

In many ways, TC4 appears to function like the Center to Protect Patient Rights (CPPR) — another large tax-exempt group that has few programs of its own and practically no staff, but through which millions of dollars flow to conservative, politically active nonprofits.

In its first tax form, covering the period Aug. 28, 2009 until June 30, 2010, TC4 listed just two individuals as working for the group: Michael Hartz, a Chicago lawyer who is TC4’s unpaid trustee, and Gretchen Hamel, who is identified as the “Program Leader” and was paid about $52,000. TC4’s stated purpose was, “[g]rant making, research, analyze, report on, make publicly available matters useful and beneficial to the community, which focus on the advancement of free markets, liberty and individual freedoms.”

By the time of TC4’s second, most recent filing, covering the 12 months ending June 30, 2011, Hartz’s name is the only one listed (other than that of a tax preparer).

Despite the Chicago connection and its Indianapolis accountant, the address given for TC4 on tax forms is that of a UPS mailbox in Alexandria, Va. OpenSecrets Blog left repeated messages for Hartz, but he did not return the calls.

TC4 and CPPR’s ties that bind

TC4 reported about $46 million in revenue in its first two years, mostly in year one. The funds that came almost entirely from investment income, rather than from contributions and grants as was the case with CPPR. Most of its grant-making came in the second year when it used money it had banked to provide funds to 13 organizations, a big increase from the previous year when it made only two grants. During the two years, nearly $37 million went out the door in grants. In fact, in its second 990, the group told the IRS that “during the current fiscal year, TC4 ceased all non-grant making programs and focused solely on the grant-making activities centered around the same initiatives.”

In spite of the technical differences in their funding streams, though, TC4 and CPPR together gave grants to some of the same politically active nonprofits — five of them received a total of $33.1 million from the two major donor groups, according to 990s the pair have filed.

Concerned Women for America, 60 Plus Association and American Commitment are all easily recognizable conservative groups. That’s not true of another organization that received $892,000 from TC4. Incorporated in Delaware in 2010, PRDIST LLC is actually a subsidiary — or another “disregarded entity” — of Americans for Prosperity, the 501(c)(4) co-founded by David Koch. AFP let loose more than $35 million in outside spending in the 2012 election, nearly all of which was used to attack President Barack Obama.

And another multimillion-dollar grantee of both TCR and CPPR also has a complicated structure. POFN LLC, another Delaware corporation formed close to the same time as PRDIST LLC received more than $8 million from the groups. It turns out to be a subsidiary of a nonprofit called SGC4 Trust, of which Gretchen Hamel — the only employee TC4 has yet listed on its tax forms — is the sole trustee.

SGC4 Trust, according to tax documents, does business under the name Public Notice — a group of which Hamel is the executive director. A project of Public Notice is called Bankrupting America, which highlights government spending and regulation as the cause of the nation’s fiscal woes.

Hamel did not respond to multiple messages left by OpenSecrets Blog.

Below is a table showing organizations that received money from both CPPR and TC4 Trust from 2009 until the end of 2010 (in TC4’s case, mid-2011). The total comes to more than $41 million.

TC4’s grantees in its second year, in addition to the groups already named, were Eleventh Edition LLC; Freedom Club; the Center for Shared Services; TRGN LLC; and Generation Opportunity. Little or no public information exists for some of those organizations.

In its first year, other than Themis, TC4 gave money to just one other organization — an LLC that, like many of its other grantees, has a name that is a jumble of letters. However, the name is smudged on the scanned copy of the 990 that OpenSecrets Blog has seen, though there are indications it may be connected to American Commitment.

Disregarded, but not forgotten

“Disregarded entities” could be considered something like subsidiaries or affiliates of their parent organizations. They are not required to file separate federal tax returns. But in other ways, they are treated as legally separate from the parent and are sometimes used to protect the parent company from liability.

And, perhaps more importantly, in this case, disregarded entities can give grants under their own names to other groups, and the recipients need only list those disregarded entities — not their parent organizations — as donors.

That helps provide an additional layer of anonymity to any person or organization concerned, for whatever reason, about being identified as a donor.

The usefulness of these layers of cloaks to those fighting disclosure was apparent recently when the California Fair Political Practices Commission ordered an Arizona 501(c)(4) group, Americans for Responsible Leadership, to name its donors. Under court order, it did so, but little was unmasked. The group got its money from CPPR, which had received it from Americans for Job Security; both are also 501(c) organizations, and whoever or whatever was the original source of the funds remained hidden. The frustrated state agency called it a plain case of “money laundering.”

The Koch connections

Links between many of the grantor and grantee groups and the Kochs are numerous and multilayered. For instance, Hamel, who ran TC4 in its first year and then became head of Public Notice, which received money from both of the larger groups, was a presenter at the 2010 edition of the brothers’ annual gathering of conservative donors and groups.

Also at that meeting with Hamel — a former Bush administration spokeswoman and frequent guest on Fox News — were Sean Noble and Heather Higgins, two of the original board members of CPPR. Yet another of the original CPPR board members, Eric Novack, was a senior fellow at the Kochs’ Americans for Prosperity.

American Commitment, which also received money from the two large donor groups, was originally headed by CPPR president Noble. Later, Phil Kerpen took over; Kerpen is on the board of Koch-funded Americans for Prosperity, which also was sent checks from the two major groups. The 60 Plus Association, the largest recipient of funds from TC4 and CPPR together and a big outside spender in 2010 ($7.1 million) and 2012 (4.4 million), is frequently reported to be on the receiving end of Koch money.

As for Themis, its 2010 revenue was $7.7 million, tax documents show. The three grants from TC4 total $6.8 million, almost all of its income. According to The Guardian newspaper, the Kochs set up Themis “with $2.5m of their seed money,” which could correspond with TC4’s first, $2.5 million grant to Themis. The organization’s data work played a role in helping Wisconsin’s Republican Gov. Scott Walker beat back a recall attempt earlier this year, Politicoreported, noting that Koch strategists discussed investing as much as $20 million in Themis. Its unknown whether the additional funds materialized, in part because the 990s that might provide clues have not been filed yet.

Themis’ tax documents list a Paul W. Brooks as the sole trustee, which is the same name as that of a former Koch Industries senior vice president. Messages left for him were not returned. The group’s chief operating officer, Ben Pratt, is a former Koch Industries executive, as well.

Groups that are granted 501(c)(4) tax status by the IRS are supposed to be focused on “social welfare” causes; politics can’t take up more than half their resources, as the rules have been interpreted over the years. Perhaps to reassure regulators that it is hewing to the law, TC4’s most recent 990 contains a statement that reads, “Each grant recipient is required to sign a grant agreement, which among other things…provides that the grant funds shall not be used for political activity.”But tax attorney Owens is skeptical that the statement is a lock against all such activity by grantees. “My reaction is that we’re not able to see the actual grant agreements. We don’t know whether they require the recipients to report back” how they used the money, “or what the agreements provide if there is a violation of the terms. And we don’t know how they define ‘political.'”

And the language may not keep organizations from using money received from TC4 to give to still other politically active nonprofits, for instance — which groups like Karl Rove’s Crossroads GPS don’t appear to consider political spending. There are still a number of mysteries about where how all the money in the TC4 and CPPR networks moves around, and at whose behest.

But if it’s not already perfectly clear that all the subterfuge is no accident, a Salvador Dali quote on the personal blog of Themis COO and former Koch Industries executive Ben Pratt sums it up nicely: “The secret of my influence has always been that it has remained a secret.”